Friday, February 22, 2008

That 50% Uni Target

There is a cheaper way to those bits of paper*

One of Labour's best known New Jerusalem targets is that 50% of our young people should be educated to degree level.

But why? How did our "evidence based" rulers reach that conclusion? Especially with higher education now costing taxpayers £12bn pa, and costing the students themselves many billions more in foregone earnings and fees.

The Public Accounts Committee has had a go at finding out. During their recent probe into university drop out rates, they asked the two mandarins in charge: Ruth Thompson, Director-General of Higher Education at the Department for Innovation, Universities and Skills, and Professor David Eastwood, Chief Executive of the Higher Education Funding Council for England.

It's worth quoting some of the exchanges because they underline the arbitrary way this highly expensive policy was decided.

Here's Labour's excellent Alan Williams, the last surviving MP from Wilson's 1964 victory and now Father of the House, who's seen it all a million times before:

Q144 Mr Williams: What evidence is there to show that 50 is the correct proportion to have going to University?

Professor Eastwood: If you look at the latest OECD statistics, participation varies a lot. It can be as high as 85%. We are working with the Government. We are certainly demonstrating that there is unmet demand for higher education. As the sector has grown...

Q145 Mr Williams: I am sorry, but you are not answering my question. My question is what evidence is there that 50% is correct? It seems a coincidental figure. It is too smooth, is it not?

Professor Eastwood: The two countries that I would point to, which I visited recently, are Australia and Japan. They are not dissimilar countries and they are at 50% participation....

Mr Williams: But they are different economies from us. What is right for them is not necessarily right for us.You cannot say that because Australia has 50%, Britain should have it too. Why Australia? It just happens to fit, does it?

Professor Eastwood: No, there are some structural similarities in the way that their higher education system and ours work...

Q147 Mr Williams: I asked what evidence there is. Is it empirically based, or is it just aspirational?

Professor Eastwood: There is a target to continue to grow the sector.

Q148 Mr Williams: It is aspirational? It has no scientific base?

Chairman: Yes or no?

Professor Eastwood: It is an aspiration to continue to grow the sector, yes.

Q149 Mr Williams: Okay, so it has no statistical validity. It is just an aspiration. That is fine, as long as we understand that... it is a target figure that has largely been plucked out of the air.

So that 50% target was plucked out of the air.

But at least they've established the economic benefits of getting a degree.

Haven't they?

Here's BOM's old friend Richard Bacon MP trying to pin down exactly what evidence the government is using. As you will see, there are a number of wildly different figures to choose from:

Q33 Mr Bacon: I want to ask you about the economic benefits of a degree.The [NAO] Report says that a still unpublished Pricewaterhouse Coopers study said that the economic benefit was £100,000. Is that correct? I remember the Government vociferously repeating a number of £400,000 at the time of the student funding debate [in 2002].

Professor Eastwood: There have been a number of attempts to calculate a lifetime’s earning benefit to a graduate.The figure given at the time of the Higher Education Bill was a gross figure rather than a net figure. The figure that I gave when I was last asked by a Select Committee about the lifetime’s earning premium was £160,000...

Ruth Thompson: May I add to that? The £400,000, as Professor Eastwood says, was a gross figure. It was also not discounted to present values. The subsequent work that we have done... has led us to refine and improve that figure... We have come up what we tend to say is a premium of "comfortably above" £100,000 over a lifetime."

Later, Alan Williams threw another figure into the potage:

Q153 Mr Williams: The Department’s estimate was £120,000 a couple of years ago, was it not?

Ruth Thompson: The Department’s estimate that we now use is comfortably over £100,000 net and discounted to present values.

Q154 Mr Williams: Comfortable is a relative term, is it not? It is as relative as your 50% figure. What is "comfortably over 100,000"?

Ruth Thompson: I am unable to give a precise figure because it moves about.

It sure does Ruthie.

Now the way these mandarins talk about their graduate lifetime earnings calculations, you'd think they were at the leading edge of experimental economics: 2002's £400K figure was an early result that through unstinting labour and matchless diligence has since been refined down to a state of the art £100K.

That is complete and utter b*****ks. Tyler will now break the Official Secrets Act to reveal he personally worked on such calculations over 30 years ago while a civil servant at the Department of Education. And it was hardly new even then.

The truth is that Labour's policy to expand higher education came first, and the "evidence" was cobbled together afterwards. And the only reason that ludicrous £400K figure was cooked up was to provide cover for DfES ministers pushing through Brown's order from the bunker to raise tuition fees. Simple as (and see here).

As we've blogged before, that £12bn pa on higher education pays for 2.3m students, or 4% of the entire population (including 27,000 doing our old favourite, the degree in media studies). Participation is still being ramped up, even though according to the OECD, at 39.3%, our graduation rate is already above the 34.8% average, and ahead of both the US (33.6%) and Japan (36.1%).

Unsurpisingly, the economic return to higher education is falling as supply increases. And for many of the new degree subjects at the new universities it is close to zero, or even negative. The latest published study from PWC (2007) shows how the discounted lifetime gross earnings premium for arts subjects has already fallen to a mere £35,000, and that's before taking account of earnings foregone while at college, and tuition fees:

Like so much else, the 50% participation target is based on nothing but wibble and wishful thinking. It is a stupidity Britain cannot and should not afford.

*Footnote. Yes folks, you can obtain an absolutely genuine 100% certifiable degree in five days for just $130. You'll get a real certificate and everything (and no cheap stick-on seals like some competitors offer). It takes less than one minute to order, and it will be worth at least as much as a degree in Fanzine Studies from the University of Basildon.

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